Tuesday, August 23, 2011

Market Afternoon Overview - August 23, 2011

Previous session overview

The market kicked back into life Tuesday as first a strong opening for equities and then a run of better-than- expected euro-zone PMIs lifted risk sentiment. The main European bourses added a quick 2% while the euro-zone services (51.5) and manufacturing (49.7) PMIs beat forecasts with the composite staying at 51.1 vs 50.1 expected.

USD suffered across the board with EURUSD nudging above USD1.45 for a one cent gain, GBPUSD likewise to USD1.6572 and USDJPY dipping to the day's low of JPY76.50.

Those moves were dented a little after Germany's August ZEW survey severely disappointed with expectations at minus-37.6 vs minus-15.1 last and current conditions slumping to 53.5 vs 90.6.

Elsewhere EURCHF regained the CHF1.14 handle but USDCHF failed to hold above CHF0.79, 3-month Swiss libor came in unchanged at a record 0.0075% low.

The Canadian dollar strengthened slightly against its U.S. counterpart early Tuesday after Canadian retail sales for June came in roughly in line with expectations.

Canadian retail sales met expectations, rising 0.7% in June from the prior month, bolstered by discount pricing for autos. However, excluding autos, retail sales fell 0.1%, compared with expectations of a 0.1% gain. Still, the market took the data as a good sign, particularly since it followed the release of weak sales data in prior period. Further, the latest Canadian data followed the release overnight of encouraging manufacturing figures out of Europe and China.

Ahead of the Canadian sales data release Tuesday morning, the U.S. dollar was trading around CAD0.9869. It then weakened to around CAD0.9858 and was most recently trading around CAD0.9867.

Market expectation

EURUSD has been giving ground for most of the last hour and has dipped as low as USD1.4438 so far. A few bids are seen in that region, traders say. The earlier risk-on attitude seems to be fading, as evidenced from the pullback in S&P futures. They were up 1% at 12:00 GMT and are only up 0.4% at 13:00 GMT. In addition at the end of this week, another date to add to the calendar is September 7. That is the date the German constitutional court will rule on the legality of the Greek bailouts.